Thursday, March 5, 2009

Malcom McLean is a classic story of an American capitalist hero. He rose from humble beginnings as a truck driver to become someone who literally helped change the world. The Baltimore Sun ranked him "next to Robert Fulton as the greatest revolutionary in the history of maritime trade." Forbes called him "one of the few men who changed the world."

For all of the dramatic influence of his career and his accomplishments, McLean is almost unknown to most Americans. Yet the whole world has felt the changes he helped bring to international trade. It would be no mistake to say that without McLean's contributions, "globalization" would not be the same as what we know it to be today.

McLean began in the Great Depression as a co-owner and driver for McLean Trucking Co., a North Carolina firm that specialized in driving tobacco up and down the East Coast. The company would eventually become the second largest trucking concern in the United States. McLean used numerous innovations to facilitate the growth of his trucking company. He converted to diesel before his competitors, he used company accounts at preferred gas stations to negotiate discounts, he built an automated terminal in Winston-Salem, NC, and he deftly maneuvered around onerous ICC regulations to achieve massive efficiencies in the trucking business.

When McLean faced increasing transit times due to traffic congestion in the 1950s, he began thinking about a way to get his trucks loaded onto coastal shipping vessels to have them bypass the busiest sections of his routes. He figured that by loading a loaded truck onto a ship, say from New Orleans to New York, he could achieve a cost reduction by not having to unpack and repack it at each point. After much trial and error, McLean and his engineers came up with the forerunner of the modern shipping container—a uniform size, prepackaged, interchangeable freight package that could be loaded onto ships, trains, and trucks with ease.

As he began to perfect the containers themselves and to build the necessary infrastructure, McLean also had to fight the rent-seeking behavior of rail shippers and other maritime shippers, as well as continued harassment from the ICC and the Justice Department's Antitrust division. In the end, the concept caught on and the shipping world adopted McLean's idea. Although others had created some form of shipping containers before McLean, it was his innovations in standardization, in adopting a uniform business model, and in promoting the concept that ultimately made containerized shipping the force that it is today. He hired the engineers who invented the crucial components of the containers themselves, the massive cranes that load and unload the container ships, and the computers and programs that help facilitate the whole process.

Before McLean, the biggest expense in intercontinental trans-oceanic trade was the massive expense and duration involved in loading and unloading cargo by the piece (actual at-sea transit was only 15% of total cost). Longshoremen had been a frequent bottleneck with worldwide labor disputes and irregular working conditions. Shipping companies themselves had to struggle to load and unload ships in the proper order and with the cargo in the right compartments (some refrigerated, some with hazardous material, some with more or less ballast weight). McLean's standardized container revolution made it possible to speed up and reduce the cost of loading and unloading maritime ships dramatically. As a result of this innovation, Americans today import four to five times as many varieties of goods as they did in the 1970s. The container revolution also helped Asian economies to boom and grow as suppliers of goods for America and Europe.

For all of his contributions to this globalization revolution, McLean is today's hero of capitalism.